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Report outlines ‘vast variations’ in hospital costs
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The amount charged by hospitals for inpatient services varies significantly based on region, and large disparities even exist within individual communities, according to a report released by the federal government.
“Consumers don’t know what a hospital is charging them or their insurance company for a given procedure, like a knee replacement, or how much of a price difference there is at different hospitals, even within the same city,” Kathleen Sebelius, secretary of the Department of Health and Human Services, said in a press release. “This data … will help fill that gap.”
The data — available on the CMS website — compares costs for services associated with the 100 most common Medicare inpatient stays.
The extent of the cost disparities vary widely based on the nature of the procedure.
For example, the average total charge for a joint replacement procedure without major complications range from $5,300 at a hospital in Ada, Okla., to $223,000 at a hospital in Monterey Park, Calif.
In a statement, Charles Mick, MD, president of the North American Spine Society, praised CMS for releasing the data, but criticized the list as extremely limiting.
“The ‘list price’ of full hospital charges is rarely paid by anyone but the uninsured or the wealthy. Those institutions catering to wealthy, international travelers or receiving full reimbursement from litigation (motor vehicle accident and workers’ compensation claims) may set charges high, expecting full reimbursement, often to subsidize care provided for their other patients at much lower rates,” Mick stated in a press release. “Even the wealthy end up negotiating cash-pay rates. Uninsured patients, often with limited resources, may suffer the effects of these deals and inflated fees.”
He also noted that charges are often arbitrarily assigned and do not reflect the actual cost of a device or procedure. Comorbidities often contribute further to the cost of a procedure, he added.
“Actual costs are much more helpful and can be combined with patient-centered outcomes to calculate the true value of a procedure,” he said. “Only then can value be compared across institutions, providers and regions and highly-efficient care identified, rewarded and replicated.”
Risa Lavizzo-Mourey
In addition to releasing the data, the Health and Human Services Department made approximately $87 million available to states to be used for the promotion of increased transparency in health care costs. The department also is funding data centers that collect, analyze and publish information on health care costs and reimbursement.
The Robert Wood Johnson Foundation pledged to help disseminate the data.
“Transformation of the health care delivery system cannot occur without greater price transparency,” Risa Lavizzo-Mourey, MD, president and CEO of the Foundation, said in a press release. “While more work lies ahead, the release of these hospital price data will allow us to shine a light on the often vast variations in hospital charges.”
For more information:
The report is available online at www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/index.html
Perspective
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Jack M. Bert, MD
I recently presented a bit of this information to the Medicare Director of Innovation in Washington, DC. I would recommend that everyone read the article by Steven Brill entitled “Why medical bills are killing us” published in Time magazine in March. It took Brill more than 2 years to gather information and write the article and confirms the absurdity of hospital pricing.
The response by hospitals when confronted with 800% to 1,000% markups for material costs is “it is very complex.” The truth is there is no logic to the pricing that is occurring and has absolutely no relationship to the expenses or costs for a procedure. For example, it costs $77 for a pack of gauze that can be purchased at a drugstore for $4.95. A single acetaminophen tablet is charged out at $1.50 but 100 tablets can be purchased online for $1.49.
It begs the question as to why hospitals are so terribly inefficient and costly. The answer is obvious – top heavy administration costs, the absurdity of “non-profit status” many hospitals maintain and the subsequent channeling of profits to pay for high administrator’s salaries, and finally the egregious charges that are utilized when patients do not have insurance as illustrated in Brill’s article. It is clear that if bundled payments go to hospitals and bypass physicians, these inefficiencies will become more evident. Orthopedic surgeons will experience the downstream effect of lower reimbursement and the inability to utilize their low-cost ambulatory surgery centers and MRIs, which have saved Medicare millions of dollars per year due to the 42% discount on reimbursement compared to the hospital outpatient department rates that are being charged by hospitals.
Reference:
http://www.time.com/time/magazine/article/0,9171,2136864,00.html
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